Are we in the middle of a financial meltdown?

1,054 posts in this topic

I got all excited that Bonner quoted Garrison Keillor, who, though no longer particularly popular here in his native Minnesota, is a raging lib and can write a damn good column when he gets wound up about politics. But alas, Bonner took Keillor out of context. While Bonner seems to think Keillor is in favor of government regulators stepping in and doing their jobs now, GK was really writing in favor of the regulators doing a decent job of regulating all along to prevent the mess.

 

Anyway, let's quote some more of that Keillor column (not linked in the Daily Reckoning):

 

 

The Republican Party used to specialize in gimlet-eyed, steel-rim, crepe-soled common sense and then it was taken over by crooked preachers who demand we trust them because they're packing a Bible and God sent them on a mission to enact lower taxes, less government. Except when things crash, and then government has to pick up the pieces.

 

Some say the tab might come to a trillion dollars. Nobody knows. And Mr. McCain has not one moment of doubt or regret. He switches from First Deregulation Church to Our Lady of Strict Vigilance like you might go from decaf to latte. Where is the straight talk? Does the man have no conscience? . . .

 

Mr. McCain seems willing to say anything, do anything, to get to the White House so he can go to war with Iran. If he needs to recline naked in Macy's window, he would do that, or eat live chickens, or claim to be a reformer. Obviously you can fool a lot of people for awhile and maybe he can stretch it out until mid-November. But the truth is marching on. A few true conservatives are leading a charge against the bailout. Good for them. But how about admitting that their cowboy economic philosophy was at fault here?

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Was listening to the radio this morning on the way home.It said on the German News ( Bayern 3) that the Stadt Münich had 4 million in the Lehmann bank but Frankfurt had 90 million.All euros but looks like the haad of financial destruction is reaching out far

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I know this qoute is long but it was one of the easiest to understand explanations of the financial/housing crisis in the US.

 

Investors.com: How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable

 

 

One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

 

The answer is: President Clinton wanted it that way.

 

Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be.

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I think the USA is already in depression, sorry if I sound pessimistic but, I think it’s going to take allot more than $700 billion rescue bill, to return all of that investor confidence back into check.

Also US financial regulation, defiantly needs serious adjustments and reforms.

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I know this qoute is long but it was one of the easiest to understand explanations of the financial/housing crisis in the US.

 

Investors.com: How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable

 

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Well, I read the article and I'm relieved now to know upon whom to place blame for the Wall Street Meltdown: POOR PEOPLE! Now why didn't I think of that before? Here I was thinking that the combination of arrogance, ignorance, deception, fraud, and greed that has characterized the Wall St./K Street complex for the last 30 years or so was the problem. What a relief to know it was all those ethnics who had the nerve to want to own a house!!!

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Great to see that you actually didn't UNDERSTAND the article then...It was about Someone intending to do good without common sense and then all the rest you wrote (greed etc...)

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The article was about how the CRA and its 1995 revision were responsible for Fannie Mae & Freddie Mac being sucked under. The speculation about Clinton's "good" intentions is absurd and pointless. Variations on the thrust of this article--that the CRA is the cause of the meltdown--have been making the rounds of RightWingWorld for the past week or so, most notably on the Limbaugh show. Unsaid is that the CRA was toothless until 1995 and after that only semi-toothless. It applied only to banks and thrifts; it did not apply to mortgage companies and only applied to affiliates of banks and thrifts IF the bank or thrift decided to count the loan as CRA-applicable. Less than 1 in 4 of the toxic waste loans were CRA-applicable. The agenda of the article was to give the impression that the arrogance, ignorance, deception, fraud and greed at the two Freddies were a function of Democratic Party shenanigans. Compared to the responsibility being currently avoided by the "Personal Responsibility" set, this is very small potatoes indeed.

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Looks like seth17 is trying out some of McCain's tactics from last night's debate (and I do mean tactics and not strategy): bookman, you just don't UNDERSTAND.

 

If you don't agree, in other words, bookman, it's because of your own weak intellect. :unsure:

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It is surprising that nobody even mentions the AAA stamp of approval the rating agencies granted to this swindle!

Without the triple A rating the banks and the pension funds and assorted greed agencies would not have bought that toilet paper.

So forward the invitation four court to them too.

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I can understand any american being totally mad about this immoral bail out.

How many hospitals, schools, old peoples homes, youth centers etc would all that money buy. What they plan to do is beyond belief, let the banks go bust and spend the money on people who need it.

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700 bn will be a drop in the ocean if America truly goes into depression... just shows you that rent controls work effectively to subdue house prices and prevent booms and busts...

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In reading through the thread it seems many believe the US has all these billions laying around, keeping it from the taxpayers for a Wall Street rainy day. The Treasury has to borrow all this money (see earlier post about Dubai, etc. choosing to buy greenbacks, US bonds...) at fairly undesirable terms considering the current situation.

 

In my mind, the key element here is restoring the flow of credit. (Initially only the brokerages and investment banks were feeling the pain, but the way the securities were wound up between different concerns, the avalanche of failures was only a matter of time.) "Access to capital" is often quoted in the press; which means little more than investors believe they won't see their lent money again -- so they don't lend.

 

Bailout is a politicized word. What is more appropriate is the US Treasury is assuming a much larger percentage of risk in acquiring the mortgage backed securities from firms that can't unload them today. Part of the reason they can't unload them is cyclical (see the lending problem above) and also the true value of them is hard to determine as the days roll by. It's possible the Treasury can sell them off at a profit (which is what much of the Congressional debate is about now), but more likely the Treasury will stretch out the investment and receive the inflow income from people paying their mortgages.

 

The last leg of this is how to "fix" the problem of individual borrowers seeing their mortgage rates go from 2% w/ no principle payments to a mortgage at 15%. Practically speaking, if the Treasury owns the mortgages (via the securities), they alone can decide to rewrite the notes back to a reasonable market rate or not. This was done in the early 1930's with good success.

 

One more note as well. I have seen little talk about what is going to happen to the credit card market. This problem is actually worse. Typically, money market funds held by a bank floats the balance sheet against money owed on credit cards. If the run on MM funds continues the CC lenders/debt holders are going to need some help as well.

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I said it was an easy to understand article...but the point was it didn't just start 5,6 , or 7 years ago it has been long in the making with an out reaching effect. Of course we the tax payers don't have the money, just like the banks, home buyers etc...didn't have the money. We will borrow it again. Be in debt to someone else again. Even Obama when interviewed said if elected he would not be able to fund the programs he has been supporting. Wouldn't even be able to change very much tax code right now without devasting the economy. I think every politician is having to choose their words carefully because this bailout is going to totally change everything.

 

If we as individuals cannot get a grip on our own sense of financial resposibility.(That includes Pols,Bankers,Wall Street Traders and the regular Joe down the street) How do we ever expect to hold a government accountable who is made up of these same people?

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Interesting article here from Asian Times about Al Qaeda's evidently successful strategy of bleeding America to bankruptcy, and how now would be the perfect time for another attack: Al-Qaeda's opportunity to hurt the US

 

 

Bin Laden has long described a three-fold strategy for driving the United States out of the Muslim world: (1) contribute to the forces creating domestic political disunity in America; (2) act and encourage other Islamists to act in a way that spreads US military and intelligence forces to the point where they lack reserves and flexibility; and (3) bleed America to bankruptcy. Obviously, al-Qaeda has been successful on the first two points and today Bin Laden is staring into the face of an entirely serendipitous opportunity to contribute to economic disaster in the United States.

I've been reading this site for years and while I think it's offered a shrewd perspective, (esp the thought-provoking articles of Spengler), I've begun taking it with a grain of salt as well.

 

From the standpoint of the political situation in the light of this article, it makes sense that Bush would be Osama's man, and McCain would represent the continuation of that. Yet even with Obama's plan of withdrawal it's probably irrelevant since the war will just move around to other locations in the middle east.

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Well this is the closest we have come to repeating the depression. I wonder if we will see an influx of expats over here in europe. I am not bad mouthing this for I just returned myself for my own selfish reasons but just wondering. Mainly because a few of my friends have sent me emails saying you left at the right time. The same thought that had came into my mind friday morning when JE started this thread. Just a random thought.

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what's there to badmouth? europe and especially germany is a lot saner to me precisely because it's been destroyed a couple of times. most americans have no clue. i really hate to think that it would have to go to such an extreme, because millions of people in america are suffering and will suffer who knows how much more, but that's out of my jurisdiction.

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One more note as well. I have seen little talk about what is going to happen to the credit card market

The banks got out of visa, so they knew what was coming.

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Mainly because a few of my friends have sent me emails saying you left at the right time

That is not much of a problem if it concerns the IT industry. Just get a few corpses over from India (or Canada)

 

The 'big' money is gone anyway in that industry .

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